Do Immigrants Really Cost US Taxpayers $279 Billion Annually?

Among the reasons that President Donald Trump is coming down hard on immigration may be the fiscal burden that first-generation immigrants levy on the government budgets. In a study by the National Academies of Sciences, Engineering, and Medicine published last fall, researchers put those costs at $279 billion a year.

According to the study, first-generation immigrants are more costly mainly at the state and local levels, due largely to the cost of educating their children. But over the longer term, the impact of immigrants on government budgets is “generally positive” at the federal level but remains negative at the state and local level with wide variations among the states.

Francine Blau, a professor of economics at Cornell University who chaired the panel that conducted the study, said:

The panel’s comprehensive examination revealed many important benefits of immigration — including on economic growth, innovation, and entrepreneurship — with little to no negative effects on the overall wages or employment of native-born workers in the long term. Where negative wage impacts have been detected, native-born high school dropouts and prior immigrants are most likely to be affected. The fiscal picture is more mixed, with negative effects especially evident at the state level when the costs of educating the children of immigrants are included, but these children of immigrants, on average, go on to be the most positive fiscal contributors in the population.

When measured over a period of 10 years or more, the impact of immigration on the wages of native workers overall is very small.

There is little evidence that immigration significantly affects the overall employment levels of native-born workers.

[S]killed immigrants are often complementary to native-born workers; that spillovers of wage-enhancing knowledge and skills occur as a result of interactions among workers; and that skilled immigrants innovate sufficiently to raise overall productivity.

Immigrants’ contributions to the labor force reduce the prices of some goods and services, which benefits consumers in a range of sectors, including child care, food preparation, house cleaning and repair, and construction.

The inflow of labor supply has helped the United States avoid the problems facing other economies that have stagnated as a result of unfavorable demographics, particularly the effects of an aging workforce and reduced consumption by older residents.

The report … left little doubt that that the nation’s 55.5 million immigrants – both legal and illegal – weren’t paying nearly enough in taxes to cover their use of public services. … The report indicated that over time, the fiscal burden will shrink to as little as $43.4 billion a year, as the second-generation immigrants who are better educated and trained than their parents pay more into the tax system to defray the cost of social services.

The National Academies study explained:

Projected over a future time horizon of 75 years, this analysis found that the fiscal impacts of immigrants are generally positive at the federal level and generally negative at the state and local level. State and local governments bear the burden of providing education benefits to children, including those in immigrant households, but their methods of taxation recoup relatively little of the later contributions from the resulting educated taxpayers. Federal benefits, in contrast, are largely provided to the elderly, so the relative youthfulness of arriving immigrants, who are often working and paying taxes, means that they tend to be beneficial to federal finances. … The analysis also reveals that an immigrant and a native-born person with similar characteristics will likely have about the same fiscal impact. Persons with higher levels of education contribute more positively to government finances, regardless of whether they are an immigrant or are native born.

According to a report at The Washington Post, the Trump administration is preparing a second executive order that includes the following draft wording:

Our country’s immigration laws are designed to protect American taxpayers and promote immigrant self-sufficiency. Yet households headed by aliens are much more likely than those headed by citizens to use Federal means-tested public benefits.

The turmoil roused by last week’s first executive order on immigration is probably something the administration wants to avoid if possible. And the economic impact of immigration is sure to be a large part of whatever happens next.